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Smaller Hedge Funds Moving Toward ETFs

Mar 11, 2014
Jing Chen

An increasing number of hedge fund managers are looking to put investment strategies in exchange-traded funds in an effort to lure more investors.

Reuters reported that some smaller hedge funds are willing to take the lower investment management fees associated with ETFs, hoping retails investors can help fuel their growth. Smaller funds are typically less able to raise capital large institutional investors that prefer larger funds with a longer track record.

ETFs is a security that tracks an index, a commodity or a basket of assets like an index fund, but trades like a stock on an exchange, making them more accessible than actively managed mutual funds--thus easier to market for a fund manager.

The news outlet interviewed Mebane Faber, the chief investment of California-based Cambria Investments, which shut its global tactical hedge fund in 2010 and reopened it as an ETF in 2010.While While Faber did not disclosed how much growth the fund experienced after its transition, he said that it was “worthwhile enough to consider converting another of his two remaining private funds.”

Actively managed ETFs, which also include some alternative strategies, had 20 launches in 2013--the largest amount in the past six years.




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